Opportunities in Serviced Offices

Colliers International has published a new report on the serviced or flexible workspace sector. Colliers outline how the workplace solutions providers have been hoovering up office space in London at a faster rate than any other sector apart from tech and media.

Flexible office providers have accounted for 18% of take-up across London during 2017 date. Central London is now home to over 7.8 million sq ft of flexible workspace from 4.5 million sq ft in 2009. This is a rise of 73% in eight years, although flexible workspace space currently only represents 4% of total London office stock.

2017 is set to deliver up to 15,000 desks by year end. Serviced office lettings appeared to have peaked at 1.4 million sq ft in 2015, however, 2017 is set to see that figure eclipsed with 1.2 million already let and a further 750,000 sq ft under offer.

WeWork has taken over 1.25 million sq ft of office space within the past 12 months. Blackstone and British Land have both begun in-house flexibile solution without leasing space to major providers like WeWork or Regus.

Paddington and City fringe, have seen increasing vacancy rates below 5,000 sq ft, and Victoria and parts of Midtown have seen void periods double in 2017. The City core has held up, but also seen activity from providers such as WeWork, Prospect Business Centres, i2, Regus and LEO.

Metropolis has researched nearly 20 specific requirements for medium/large London serviced offices in recent months. These new searches come on top of 25 recent transactions for space. Opportunities exist for agents recruiting occupiers for the large new flexible work centres, for fit-out contractors refurbishing usually previously vacant space, for furniture providers and removal firms handling the myriad moves to the new buildings.

Colliers say the need for short leases and flexible space, particularly since the Brexit vote, is driving demand for increasing volumes of flexible workspace space. Although, flexible workspace only represents 4% of London office stock, it looks set to become an important slice of the market, not just in London, but increasingly in regional cities too.

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Sector Analysis – Serviced Offices

Metropolis has carried out an exclusive research survey into the rise of the serviced office sector since early 2013 in central London. Occupiers tell Metropolis that their need for short leases and flexible space is driving their demand for increasing volumes of serviced office space, especially in London’s increasingly digital economy, where space needs are hard to predict five years ahead. London is already the home to over 800 of the 2,300 serviced office centres nationally and the sector is growing fast. The results below illustrate the rising importance of the sector to office demand in the capital.

Since January 2013 a total of 4m sq ft of offices has been let to serviced office operators in 170 deals over 5,000 sq ft. At an average one workstation for every 100 sq ft in central London, this amounts to space for up to 40,000 new workstations in the last three and a half years.

Serviced office and co-working lettings peaked at 1.7m sq ft in 2015, when they accounted for 15% of London take-up, but if trends for the first 7 months of 2016 are maintained then this year will almost reach the heights of 2015.

sq ft
2013 537,000
2014 875,000
2015 1,700,000
2016 (7 months) 900,000

The most acquisitive groups during this time have been:

sq ft
WeWork 917,000
Office Group 574,000
Regus 436,000
i2 Offices 314,000
Instant Offices 224,000
London Executive 175,000
Ventia 50,000

Much of the interiors work has been carried out ‘in-house’, however there is some evidence of a number of smaller contractors working on the refurbishments of recently acquired space. On the design side a variety of architects have been appointed to advise on revamps including Buckley Gray Yeoman and Morrow + Lorraine.

Looking ahead, Metropolis is tracking around a dozen established serviced office operators such as BE Offices and Orega looking for further centres in London, as well as a number of new entrants to the market, such as Office Space in Town and Pennine Way  looking to expand from a current 1-2 centres. Analysts believe the sector could grow in value to over £62bn by 2025.